Centre announces new PPP policy to make housing affordable

The central government on Thursday unveiled a new private-public partnership policy for affordable housing in a move to give a big push to the housing and construction that has emerged as the economy's main mover.

The new policy allows extending the present central assistance of up to Rs2.50 lakh per each house to be built by private builders to those built on private lands besides opening up immense potential for private investments in affordable housing projects on government lands in urban areas.

The new policy, announced by minister of housing and urban affairs Hardeep Singh Puri, gives eight PPP options for private sector to invest in affordable housing segment.

Addressing the 'Real Estate & Infrastructure Investors Summit-2017' organized by real estate body NAREDCO in Mumbai, Puri explained that this policy seeks to assign risks among the government, developers and financial institutions, to those who can manage them the best besides leveraging underutilised and unutilised private and public lands towards meeting the housing for all target by 2022..

The two PPP models for private investments in affordable housing on private lands include extending central assistance of about Rs2.50 lakh per house as interest subsidy on bank loans as upfront payment under the Credit Linked Subsidy Component (CLSS) component of Pradhan Mantri Awas Yojana (Urban).

Under the second option, central assistance of Rs1.50 lakh per house will be extended to houses built on private lands, in case the beneficiaries do not intend to take bank loans.

Puri stated that eight PPP options, including six for promoting affordable housing with private investments using government lands, have been evolved after extensive consultations with state governments, promoter bodies and other stakeholders. The options under the model using government lands include:

DBT Model: Under this option, private builders can design, build and transfer houses built on government lands to public authorities. Land will be allocated based on the least cost of construction. Payments to builders will be made by the public authority based on progress of project as per agreed upon milestones and buyers will pay to the government.

Mixed Development Cross –subsidised Housing: Under this model, government land will be allotted to private builders based on number of affordable houses to be built on the plot, cross subsidising this segment from revenues from high end house building or commercial development.

Annuity Based Subsidised Housing: Builders will invest against deferred annuity payments by the government. Land allocation to builders will be based on unit cost of construction.

Annuity-cum-Capital Grant Based Affordable Housing: Besides annuity payments, builders could be paid a share of project cost as upfront payment.

Direct Relationship Ownership Housing: As against government mediated payments to builders and transfer of houses to beneficiaries in the above four models, under this option, promoters will directly deal with buyers and recover costs. Government will allocate land based on the unit cost of construction.

Direct Relationship Rental Housing: In this model, builders will recover the costs through rental incomes from the houses built on government lands.

Under these six government land based PPP models, beneficiaries can avail central assistance of Rs1.00 to Rs2.50 lakh per house as provisioned under different components of PMAY (Urban). Beneficiaries will be identified as per the norms of PMAY (Urban).

Puri, however, cited a lack of enthusiasm so far on the part of the private sector in entering affordable housing segment despite the huge scope it offers under the Pradhan Mantri Awas Yojana (Urban) and an enabling eco-system put in place through several concessions and incentives offered, including the grant of infrastructure status for this segment.      

The minister said the government has taken note of most of the suggestions made in the KPMG-NAREDCO report published last month and that the government has already initiated action in respect of some of the suggestions therin.

Puri cited last week's announcement of a time bound review of FSI/FAR norms in 53 cities with  a population of million and above each and state capitals to enable better utilisation of scarce urban land parcels.

The government, Puri said, will soon take a view on allowing urban housing projects in peripheral villages in consultation with the ministry of rural development.

Online mechanism for time bound approvals for building plans and construction permits has already been introduced in Mumbai and Delhi and the same would be extended to 53 cities with population of above one million each soon, he said.

Puri also said the government will soon come out with the Model Tenancy Act and National Rental Housing Policy soon.

Puri exhorted private developers to seize the investment opportunities in affordable housing in the prevailing enabling environment saying ''It is time to stop debate and swing into action''.